By Jeffrey T. Lewis

SÃO PAULO--Brazil's consumer prices jumped higher in December, boosted by food and energy prices, leaving the 12-month figure above the central bank's 4% target for 2020 and opening the door for higher interest rates later this year.

Consumer prices increased 1.35% from November, the fastest monthly pace since February 2003, the Brazilian Institute of Geography and Statistics, or IBGE, said Tuesday. Prices rose 4.52% from a year earlier. In November, prices rose 0.89% and increased 4.31% from a year earlier. Prices also rose 4.31% during 2019.

Brazil's inflation accelerated in the final months of 2020, after hitting a 21-year low in May, as emergency aid payments to the country's poorest residents during the coronavirus health crisis increased demand at home and the weak real helped boost exports of meat and other food products.

The pandemic also slammed economic growth early last year, pushing the central bank to cut its benchmark lending rate, the Selic, to a record low of 2% to help spur a recovery. With unemployment still high and the aid payments ending in December, economists expect a rebound this year, but from the low level at the end of 2020, and see the bank raising the Selic to 3.25% by the end of 2021.

"You have two bad situations happening at the same time--the weak economy and rising inflation," said André Diz, an economics professor at São Paulo's Ibmec business school. "The central bank should raise rates, but not by much because anything that doesn't help growth will make things worse."

Housing costs rose 2.88% in December and had the biggest effect on the consumer-price index in the month, as electricity prices jumped 9.34% in the month because scant rain meant the country's power utilities couldn't generate as much cheap hydroelectric power.

Food prices rose 1.74% in the month, down from an increase of 2.54% in November, with meat prices 3.58% higher and the cost of rise up 3.84%, the IBGE said.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

(END) Dow Jones Newswires

01-12-21 0738ET